Tuesday 16 January 2018

What exactly is happening at Uber and why has Travis Kalanick resigned?

Uber CEO Travis Kalanick attends the summer World Economic Forum in Tianjin, China, June 26, 2016. REUTERS/Shu Zhang/File Photo
Uber CEO Travis Kalanick attends the summer World Economic Forum in Tianjin, China, June 26, 2016. REUTERS/Shu Zhang/File Photo

James Titcomb

Uber's founder Travis Kalanick has resigned following a string of controversies at the car-hailing app and after major investors asked him to leave.

The company, the most valuable technology start-up in the world, has been mired in criticism for several months, with a barrage of scandals putting Kalanick under pressure to go.

What is Uber?

Uber was founded in 2009 as a smartphone app for making hiring private drivers more affordable, but quickly moved to offering low-cost rides that would compete with taxis, a highly-regulated industry that had barely changed in decades.

The app used smartphone GPS systems to seamlessly connect passengers and drivers. At the end of a journey, an algorithm charges the passenger's credit card, with Uber taking a fee.

Why is the service so controversial?

The popularity of Uber has turned many cities on their heads. Taxi drivers, who have seen the app threaten their business, have protested against Uber, and in many places regulators have deemed the app in breach of transport laws.

Some claim that since Uber drivers often do not have to abide by the same training or safety standards as taxi drivers, they put passengers at risk. The rise of Uber drivers has also led to fears about congestion, while its surge pricing, which raises the cost of a ride in periods of peak demand, has been attacked, especially when activated during stressful times.

Uber's relationship with its drivers has also been controversial. They are not employees but defined as self-employed, meaning that they can earn less than the minimum wage (Uber says on average they earn significantly more), pay their own expenses, and are not guaranteed holiday or sick pay. This model has faced legal challenges in many countries.

Read more: The top five (recent) scandals which have engulfed Uber

What about the company itself?

Uber itself, and its hard-charging chief, have rarely failed to stay out of trouble. Mr Kalanick has often been seen as prioritising winning at all costs, and happy to confront his opponents. "We’re in a political campaign, and the candidate is Uber and the opponent is an a****** named Taxi," he once said. The company's corporate values include "Meritocracy and Toe-Stepping" and "Always Be Hustlin'".

But it is in the last six months that scandals began to mount. Mr Kalanick was covertly filmed verbally abusing a driver, Uber has been accused of developing technology that evaded regulators and broke Apple's rules, and Google has sued it over claims it stole driverless car technology. A number of executives have also left.

But perhaps most damaging have been the allegations about a culture of sexist harassment. Uber launched a wide-ranging investigation into claims from a former engineer, Susan Fowler, about the company. The review has seen more than 20 people leave, including its second-in-command.

Why is Kalanick leaving?

As the public face and visionary behind Uber, Mr Kalanick has been forced to take responsibility for its shortcomings. As the findings of the misconduct investigation were made public, he said he would take an indefinite leave of absence to reflect on his leadership.

But a number of high-profile investors in Uber -  Benchmark Capital, First Round Capital, Lowercase Capital, Menlo Ventures and Fidelity Investments - demanded that he leave, making his position untenable.

What happens now?

Uber is facing a leadership vacuum: it has no chief executive, chief operating officer or chief financial officer - the three most senior roles in a company. Mr Kalanick also retains a huge stake in Uber and will continue to sit on its board, suggesting he will be a looming presence for whoever does take over.

At the same time, it is trying to overhaul itself - applying the recommendations of the investigation into its culture and win back the trust of both drivers and passengers. As the world's most valuable technology start-up, it is also trying to clear the path to reducing losses and going public, although this seems years away now.


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